Money Market Fund Primary Fund (RFIXX) Freezes Redemptions

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One of the largest money market funds has frozen redemptions for seven days as the net asset value of its shares falls below $1. THIS IS A MONEY MARKET FUND, NOT A MONEY MARKET ACCOUNT. MONEY MARKET FUNDS ARE NOT FDIC INSURED WHILE MONEY MARKET ACCOUNTS ARE.

Marketwatch is reporting that money market fund Primary Fund  (RFIXX) is freezing redemptions for seven days starting Tuesday, September 16.  Its $785 million holding of Lehman Brothers Holdings debt has been valued at zero. As of 4 p.m., the value of the fund's share is 97 cents.  Presumably, investors who have money in the fund will not be able to withdraw it until the freeze has been lifted.  It's unclear what the net asset value will be at that point.  In most cases, the parent company of the fund injects cash or assets to bring the value back to $1 per share. 

We'll share more information as we receive it regarding customer withdrawals.

The Primary Fund is mananged the cryptic sounding The Reserve, a financial company that created the world's first money market fund in 1970. 

Clearly, the bankruptcy of Lehman blow a giant hole in the funds value.  The drop in its NAV shows one of the ways that Lehman's bankruptcy is rippling through the financial world.

It's important to note that The Primary Fund is a money market fund, not an FDIC money market account.  A money market fund can be best thought of as a mutual fund with holdings made up primarily of short-term, high-grade debt obligations and cash-on-hand to ensure liquidity.  Money market funds are not covered by the FDIC.  


Reviews

  • Ed

    September 27, 2008

    It is the 26th of September, past the 7 day period, and this is still frozen. When will it get un-frozen and what is the SEC doing about it?

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